Despite outperforming its closest peer ExxonMobil (XOM) over the past 10 years, Chevron (CVX) shares have lagged since the price of oil started dropping. In the past 12 months, CVX stock is down 25% versus a roughly 15% decline for XOM shares. While the price of oil is down considerably more than CVX stock, moves of this magnitude are rare for CVX. Only during the financial crisis were shares down more during such a short period of time, and that was when oil prices bottomed at $10 per barrel lower than this year’s trough.
After the previous decline of this magnitude in 2008/2009, CVX shares went on to return almost 100% in less than two years. Does the stock have a similar potential this time around? CVX’s dividend has only hit a >4% yield twice in the past 20 years. Under both previous scenarios, it would have been a wise investment decision to buy shares. If you had bought during the 2002 dividend yield peak, you would have accrued the 4% annual dividend as well as an average 9% annual capital appreciation on the stock for the next 13 years. After the 2009 dividend peak, you would have had a similar 4% dividend yield plus 5% in annual capital appreciation.